Answer:
A bad debt ratio of more than 10% is considered high and often is a sign that you are in danger of credit overload. So, I'd $420 is the maximum amount he can spend on credit card payments and loan each month.
Step-by-step explanation:
Let's clear this with an example:
Rafael makes $4,200 a month and let's say he spends $550 on credit card payments and $450 on an loans.
Then, the ratio calculation would be $1000 / $4,200 = 0.24
Multiply that by 100 for a debt-income-ratio of 24%.
In this example, Rafael spends almost a quarter of his income on debt which is considered bad debt in economics.
